Cairn’s Gold
Flushed with the success of its operations at the Managla oil field in Rajasthan, Cairn India is getting ready to expand its foot prints elsewhere in the subcontinent
Gayatri Ramanathan
See also interview with Rahul Dhir, Ceo Cairn India
It is an enviable record – some of the lowest lifting costs in the world and fastest field development records combined with the country’s largest oil discovery in recent years. As the operator of the Laxmi field(in Gujarat) Cairn India developed the field in 30 months after discovery. At Ravva offsore (Andhra Pradesh),Cairn ramped up production from 3500bpd (barrels per day) to 50,000 bpd and has extracted 200 million barrels against an estimated 2P reserves of 101 million barrels, while maintaining a lifting cost of US $ 2 a barrel. And now Mangala, India’s largest on-shore discovery since 1985, went into production in three and a half years with a delivered cost of US $ 5 a barrel. The Mangala field alone (the world’s biggest discovery for the year 2004),holds the potential to reduce India’s oil import bill by 20 per cent once it ramps up to full capacity in 2011 and starts producing around 175,000 barrels of oil a day. While government of Rajasthan is set to earn a royalty of Rs 36,000 crore over the life of the field, the central government will earn around Rs 46,000crore from the oil benchmarked at a 10-15 per cent discount to Brent.
Cautious ramp up
But for now the field is producing a few hundred barrels a day as the initial ramp up is slow. “Given that it is a new set up, we are cautious and ramping up slowly,” says Rahul Dhir, cheif executive officer and managing director Cairn India. “The first train is ready and can process around 30,000 barrels a day. The second one will be ready by the end of 2009and will add 50,000 barrels of capacity, taking up the total capacity to 80,000barrels a day. The third train will be ready sometime in the first half of 2010and will take up capacity to 130,000.The fourth one will be ready some time in 2011 and will take capacity up to205,000 barrels a day. We have built some redundancy into the system as we anticipate that there is more to produce from this field than what we have projected currently,” says Dhir. Cairn’s ambitions don’t stop at Rajasthan. In its 15th year of operation Ravva – “an emotional connect for us because that’s where our senior staff grew up” as Dhir puts it – will see a 4-Dseismic survey to locate bypassed oil and in-fill drilling to extract more oil. In Sri Lanka, where the company has a few blocks, exploration will start early next year. Rajasthan will see additional drilling of 3 to 6 exploration wells. Exploration of the company’s blocks in the Krishna-Godavari basin is also afoot. And it is looking actively at NELP VIII.
But most of the expansion plans build on existing capabilities, says Dhir. “We are looking at how best to leverage these– low operational costs and speedy field development capabilities. We are being approached by several governments that have seen what we have done in India, especially, the Ravva field. We took a field that was producing 3,700 barrels a day and pushed it to 50,000 barrels and gave the government US $ 4 billion in royalty. We are targeting 60 per cent oil recoveries in one of the lowest cost operations at Ravva.” But Cairn’s most ambitious plans are reserved for Rajasthan where Dhir expects that in-place reserves alone will last the company another 40 years. In addition, it is also planning to increase production using a host of technologies to extract up to 50 per cent of the reserves. “This shifts the risk from a high exploration risk to a more acceptable project execution risk. These techniques could actually help us lift up to 1 billion barrels from Mangala,” says Dhir. The current target is around 700 million barrels. Add 50 per cent recovery from the other discoveries and Cairn could be looking at recovering close to 1.75billion barrels from Rajasthan alone. Initially, Cairn’s oil will be lifted by ONGC’s subsidiary MRPL which will get its first consignment in October. Once the pipeline is built the crude will also flow to Indian Oil’s Panipat refinery. Or if the government allows sale to private refiners, it could go the RIL refinery at Jamnagar and the Essar refinery at Vadinar. Both refineries can handle the waxy crude. The crude could also be lifted by BPCL’s Bina refinery at a later date, while HPCL is already mandated to do so. But for now, it is back to the nitty-grittyof running a tight operation for Dhir and his team as the petroleum ministry and the DGH deliberate on their proposals- a “matter of fortune” as Dhir puts it. Orone of well-planned strategy.
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